Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Thompson & Anor t/as Staunton and Thompson Lawyers v Schacht [2014] NSWCA 247
• Hearing dates: 30 April 2014
• Decision date: 30 July 2014
• Before: Basten JA at [1]; Barrett JA at [47]; Leeming JA at [126]

Decision

Appeal to be allowed; order 1 made in the Common Law Division and entered on 21 May 2013 to be set aside; judgment for reduced damages to be awarded.

The parties are directed to confer with the purpose of resolving any outstanding issues and providing consent orders giving effect to the judgment of this Court within 21 days of delivery of these reasons. In the event that agreement is not achieved, whether in part or in whole, each party should file, no later than 35 days after delivery of these reasons, a document identifying his or their proposed orders and a short statement explaining the basis of any calculation and the reason for orders in that form.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: DAMAGES - measure and remoteness of damages in actions for tort - measure of damages - negligence - negligence by solicitors in preparing a financial agreement between spouses causing the agreement to be not binding - subsequent compromise of matrimonial litigation on terms less advantageous to one party than those provided for in the defective agreement - damages for negligence awarded to that party based on the difference between actual financial outcome and that which would have pertained had the agreement been binding - whether certain components wrongly included by primary judge
• Legislation Cited: Civil Liability Act 2002 (NSW), ss 5D, 5E, 50; Family Law Act 1975 (Cth), Part VIIIA, ss 90, 90F, 90G, 90K, 90KA
• Cases Cited: Clark v Macourt [2013] HCA 56; 88 ALJR 190; Fink v Fink [1946] HCA 54; 74 CLR 127; Heenan v Di Sisto [2008] NSWCA 25; Livingstone v Rawyards Coal Co (1880) 5 App Cas 25; Malec v J C Hutton Pty Ltd [1990] HCA 20; 169 CLR 638; Paino v Paino [2008] NSWCA 276; 40 Fam LR 96; Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 77 ALJR 768; Schacht v Bruce Lockhart Thompson and Dennis Michael Staunton (trading as Staunton and Thompson Lawyers) (No 3) [2013] NSWSC 316; Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332
• Category: Principal judgment
• Parties: Bruce Lockhart Thompson and Dennis Michael Staunton t/as Staunton and Thompson Lawyers (Appellants); Daniel Schacht (Respondent)
• Representation: Counsel: A P Cheshire (Appellants); P S Braham SC/D A Lloyd (Respondent); Solicitors: HWL Ebsworth Lawyers (Appellants); RGSLaw (Respondent)
• File Number(s): CA2013/142839

Decision under appeal

• Jurisdiction: 9111
• Citation: [2013] NSWSC 316
• Date of Decision: 2013-04-10 00:00:00
• Before: Johnson J
• File Number(s): 2009/297435

Judgment

1 BASTEN JA: The appellants are a firm of solicitors, one of whose lawyers acted for the respondent, Daniel Schacht, during 2002 and 2003. The retainer involved preparation of a financial agreement between the respondent and his then wife, Claudia Dieziger, to deal with division of their property in the event of a breakdown of the marriage. The agreement was entered into on 15 April 2002, shortly after the marriage. Its validity was governed by Part VIIIA of the Family Law Act 1975 (Cth).

2 In 2003 the respondent purchased a home in his own name, but proposed that Ms Dieziger have a 15% share. On 31 March 2003 the parties executed a further deed granting the 15% interest to Ms Dieziger. (In March 2006 the respondent signed a paper purporting to increase Ms Dieziger's share to 20%.)

3 The parties separated in April 2006. There were then two children of the marriage. Ms Dieziger brought proceedings against the respondent under the Family Law Act seeking maintenance and a division of their property. She alleged that the financial agreement was unenforceable, for failure to comply with the requirements of the Family Law Act. That allegation was accepted by the Federal Magistrates Court and the whole of the proceedings were settled on terms recorded in a deed dated 15 December 2008 ("the 2008 settlement").

4 The respondent then brought proceedings against the appellants in the Common Law Division claiming damages with respect to losses said to have arisen as a result of the invalidity of the financial agreement. The trial judge (Johnson J) upheld that claim: Schacht v Bruce Lockhart Thompson and Dennis Michael Staunton (trading as Staunton and Thompson Lawyers) (No 3) [2013] NSWSC 316. By orders entered on 21 May 2013, the respondent obtained a judgment in an amount of $804,420. Liability is no longer in issue, the present appeal being limited to certain specific challenges to the assessment of damages.

Calculation of damages: legal principles

5 There was no disagreement between the parties that the damages payable by the appellants were to be calculated as the difference between the amounts payable by the respondent under the 2008 settlement and the amounts which would have been payable pursuant to a valid and enforceable financial agreement, executed in 2002 and varied in 2003.

6 The claims were somewhat imprecisely drafted in terms apparently designed to allege both breach of contract and breach of a general law duty of care. The trial judge found that the solicitor engaged by the respondent had breached his "duty of care with respect to both the 2002 and 2003 retainers": at [130]. In his first discussion of the principles for assessing damages, the judge dealt with both breach of contract and tort, without suggesting that any difference would result depending on the cause of action: nor was that approach challenged on the appeal. However, the trial judge stated at [101]:

"The question of what the Plaintiff would have done, as a matter of fact, had he been given different advice is to be approached on the balance of probabilities, but where causation depends upon the act of a third party, a proportionate approach is to be adopted based upon the magnitude of the lost chance, as illustrated in Heenan v Di Sisto [2008] NSWCA 25 at [28]-[50]."

7 The law approaches questions of causation and damages for loss of a chance differently (and somewhat awkwardly). The principles were addressed by Giles JA (with whom Mason P and Mathews AJA agreed) in Heenan. That case also involved a claim in damages against a solicitor. The respondents had been the owners of two adjoining properties which they agreed to sell to a developer. The sales fell through, but the claim in negligence against the solicitor was based on his failure to make the contracts interdependent. Giles JA identified the issues in the following terms:

"[27] Putting aside nominal damages for breach of contract, the respondents were entitled to such damages as would put them in the position they would have been in had the appellant done what he should have done; that is, had he sought instructions as to whether the contracts for the sale of No 33 and No 126 should be made interdependent or suggested that they should be made interdependent. That position was not limited to having interdependent contracts, but extended to the commercial outcome of having interdependent contracts; the contracts were steps in achieving a commercial transaction. Deciding what the respondents' position would have been involved past hypothetical events. If the appellant had so suggested and sought instructions, would the respondents have instructed him that the contracts should be made interdependent? Would Skyworld [the prospective purchaser] have agreed? Even if contracts were exchanged with interdependency clauses, it was not inevitable that Skyworld would have completed the contracts: would it have completed them?

[28] As a general proposition past hypothetical events in the assessment of damages are not decided on the balance of probabilities, by which satisfaction that it is more likely than not that they would in fact have occurred establishes for the assessment that they would have occurred. Rather, the damages are assessed according to the degree of probability that the events would have occurred, provided that the probability is not so low as to be speculative ...: Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 at 643. ...

[29] There is, however, an initial question of causation: has the negligence or other wrong caused the loss of a chance? This is decided on the balance of probabilities. ...

...

[33] I adopt this approach to whether the respondents would have instructed the appellant that the contracts should be made interdependent. As will appear, it would not matter if what the respondents would have done was according to the degree of probability. Whether Skyworld would have agreed and whether it would have completed the contracts, however, are part of the valuation of the lost chance, to be ascertained by reference to the degree of probabilities or possibilities."

8 This more expansive statement of the principles in Heenan is necessary because one of the principal challenges to the assessment of damages for spousal maintenance alleged that the judge applied incorrect principles in assessing the value of a lost chance and in failing to allow for relevant contingencies. A similar issue arose with respect to a claim for the legal costs involved in the proceedings in the Federal Magistrates Court.

Spousal maintenance

9 There were three variables with respect to the assessment of spousal maintenance. The first was the point of commencement, the second was the period over which payment would be made and the third was the rate of payment. Reference to the commencement date and the period of payments may seem trite; however, some of the calculations undertaken by the parties compared different periods.

10 With respect to the date of commencement, there was no dispute that maintenance payable under the hypothetical valid financial agreement would have commenced on the date of breakdown of the marriage. That date was 21 April 2006, when the respondent moved out of the matrimonial home. However, no doubt because the respondent had been paying maintenance during the proceedings under the Family Law Act, the 2008 settlement made provision for the future, namely from December 2008.

11 Greater difficulty attached to the calculation of the period for which payments would be required. That was because the relevant part of the 2002 agreement was in this respect unclear and was concededly void for uncertainty. However, the relevant part of clause 21 involved agreement by the respondent to:

"... contribute to the support of Claudia by paying spousal maintenance for a period until she is able to return to the workforce taking into account the need to care for any children, and her ability to support herself as a result of property acquired by her, in order that Claudia can maintain a standard of living similar to the pre-separation standard of living, such payments of spousal maintenance to continue for a period of at least 3 years from the date of separation."

12 At trial, the respondent treated this invalid clause as evidence that the hypothetical valid agreement would have included an obligation to pay spousal maintenance for three years. That assumption was not consistent with the extract from clause 21 set out above. The relevant period was identified as a period from the date of separation until Ms Dieziger "is able to return to the workforce". A minimum period of three years was fixed: the actual period would have depended, as clause 21 recognised, on various circumstances, including "the need to care for any children" and her ability "to support herself as a result of property acquired by her".

13 The rate of payment was not specified, nor was it stated to be flexible, although the criterion based on maintaining a standard of living, may have allowed for both calculation and variation. Expert evidence accepted that a court would have allowed not more than $500 per week and that was treated as the rate to be applied under a valid agreement. (The 2008 settlement provided a sum based on $400 per week.)

14 Evidence accepted by the trial judge was that, under a valid agreement, maintenance would have been payable at "no more than $500.00 per week for at least three years": at [180]. That finding was not challenged. However, the calculations accepted by the trial judge (as presented by the respondent) assumed that "at least three years" meant "no more than three years". That was an approach supported neither by the language of cl 21, nor by the other evidence.

15 The evidence at trial included a typewritten note prepared by the respondent for discussion with his solicitor, in preparation of the financial agreement. It identified an assumption that Ms Dieziger "can have at least part time work once the children are ALL 12 and older". The inference to be drawn from that document was that the respondent intended to pay spousal maintenance until the youngest child was 12 years of age. That was put to him in cross-examination, but, without rejecting the proposition, he did not agree to it. He did, however, agree that Ms Dieziger was to receive "spousal maintenance at least until the children went into primary school": Tcpt, 28/02/12, p 145(6). The younger child was born in December 2005. He would not ordinarily have been expected to enter primary school until after his sixth birthday in December 2011.

16 A reasonable inference based on this evidence would be that the respondent, if pressed to identify more precisely the arrangement with respect to spousal maintenance, would have accepted that such maintenance would have been payable at least until December 2011 and possibly at a reducing rate thereafter, on the assumption that Ms Dieziger should then be able to engage in part-time remunerative activity.

17 The relevant period of comparison is that from December 2008, as the settlement assessed an amount on account of spousal maintenance payable for the future. That amount was $76,200: see the 2008 deed, clause 3.9.

18 If the hypothetical valid financial agreement had included an obligation to pay spousal maintenance at $500 per week until the younger child turned six years of age (which would have occurred in December 2011) there would have been a contractual obligation, as at December 2008, to pay maintenance for three further years, in an amount totalling $78,000.

19 The result of these findings and calculations is that the respondent was not required, as a result of the 2008 settlement, to pay any amount on account of spousal maintenance beyond that which would have been payable under the hypothetical valid financial agreement. The negligence of the solicitor therefore caused no loss on this aspect of the claim.

20 This analysis has not been the subject of any allowance for contingencies. According to the conventional analysis, the respondent bore the burden of establishing that the negligence of his solicitor had caused him some lost opportunity with respect to this particular head of damage. However, for that purpose he would have needed to demonstrate on the balance of probabilities that he would have sought to strike a more restrictive bargain with Ms Dieziger. On the limited basis of the assessment set out above, there was no reason to suppose that he would have attempted to impose any such limitation. Viewed prospectively from the time of the hypothetical agreement, there were contingencies, such as Ms Dieziger's remarriage, which might have led to a reduced liability with respect to spousal maintenance. Such contingencies are now irrelevant because the actual circumstances are known. (Furthermore, the 2008 settlement might have been in different terms in the event that contingencies had crystallised by that time.)

21 In fact the contingencies worked the other way; that is, there was a real possibility that Ms Dieziger would have sought and he would have agreed to some responsibility continuing while the youngest child was still in primary school. The reference in the respondent's note to 'all the children turning 12' supported that possibility. If the figures for the period up to December 2011 had indicated that the hypothetical financial agreement would have been less generous than the 2008 settlement, it would have been relevant to consider the possibility that Ms Dieziger would have obtained a more generous financial arrangement. It is not necessary to explore this possibility at this stage.

22 The trial judge awarded an amount of $63,200 together with an amount of interest calculated at $12,900. Assuming that those are the figures contained in the final judgment, it must be reduced by an amount of $76,100.

Legal costs

23 On 13 February 2007, after the respondent and Ms Dieziger had separated and after there had been some discussion between them, the respondent received a letter from her solicitor seeking a settlement of "all property and child support issues", not limited by the financial agreement. The letter set out four bases upon which the 2002 agreement might be set aside. These matters, which may have been of varying cogency, appeared to reflect factors set out in s 90K and did not specifically identify a failure to comply with s 90G(1)(b) which was the source of invalidity accepted by the Federal Magistrates Court.

24 On 26 February 2007 the respondent commenced proceedings in the Federal Magistrates Court seeking parenting orders with respect to the two children of the relationship. In a response filed on 5 April 2007, Ms Dieziger sought orders setting aside the 2002 financial agreement, pursuant to s 90K or, in the alternative, a declaration that the agreement was invalid and unenforceable pursuant to s 90KA or not binding pursuant to s 90G.

25 On 23 August 2007 the parties agreed to have determined as a separate question the issue of compliance with the provisions of s 90G(1). That matter was heard on 1 November 2007, a declaration that the agreement was not binding being made on 14 April 2008. No order was made as to the costs of the proceedings but it was agreed at trial that the respondent had incurred (perhaps surprisingly) costs in an amount of $70,000. That figure was put before the trial judge with the following explanation from counsel for the appellants (the defendants at trial) at Tcpt, 29/02/12, p 207(30)-(40):

"... That represents the costs of the Family Magistrates Court proceedings insofar as they relate to the section 90G issue. So separating out the parenting issues and the other arguments that have been raised. That is intended to leave open my argument that legal costs of a similar amount would have been incurred in any event because ... there would have been section 90K challenges ...."

26 The trial judge, when considering these costs under the heading of "Damages", noted the agreement as to the sum and the argument that they would have been incurred in any event. He then concluded that the respondent had "demonstrated an entitlement to the sum of $70,000.00 being included in the award of damages": at [174]. He continued, stating that this was "a reasonable allowance for costs" (a troubling conclusion, but not in dispute) and that the costs were "incurred in litigating issues arising from the 2002 Financial Agreement" (again, an issue not in dispute).

27 This reasoning must be taken, implicitly, to have dismissed the appellant's argument that the costs would have been incurred in any event. However, the ground on which that submission was dismissed is a matter of some importance. If it were dismissed on a factual basis, there would have been a question as to which party bore the onus of proof. If the submission were dismissed as immaterial, it was necessary to explain why that was so. The appellants' submission that the trial judge failed to give adequate reasons for this aspect of his findings must be accepted.

28 It is possible, however, that the problem lay at an earlier stage in the reasoning. Thus, at [141]-[145] the trial judge dealt with certain matters described as "some causation issues". The judge stated at [142] that the respondent "had an agreement that was vulnerable to attack on formal grounds." He then noted that the attack occurred in the family law litigation, "causing cost and delay, which was exactly the circumstance which the making of a binding Financial Agreement was intended to make less likely." He then concluded that the respondent had established that "loss or damage was caused to him, arising from the breaches of the 2002 retainer and the 2003 retainer": at [145].

29 Putting these elements of the reasoning together, it appears that the trial judge, having accepted that some loss was caused by the negligence of the solicitors, then treated as a head of damages each specific loss which was established by the evidence or accepted by the parties, subject to the solicitors demonstrating that, for some reason, that head of damages should not be accepted. If that approach is sound, the inclusion of the legal costs in the judgment should be upheld. That is for two reasons: first, the respondent presented (and the appellants accepted) that the sum of $70,000 was to be included or rejected, rather than accepted but discounted. Secondly, the appellants did not establish on the balance of probabilities that those costs (or more) would have been incurred in any event.

30 That reasoning, however, should not be accepted. The problem lies, not so much in the fraught distinction between proof of causation of loss and assessment of the quantum of the loss, but in a prior question as to whether any loss had been proved. Absent loss no question of causation can arise. Further, it is not sufficient to reason, as the trial judge appears to have done, that proof of some loss is sufficient. Where there are discrete independent elements relied upon, each must be shown to involve a loss.

31 That principle is reflected in s 5D of the Civil Liability Act 2002 (NSW), which deals with a determination that negligence "caused particular harm". The term "harm" includes economic loss: s 5, harm (c). The reference to "particular" harm requires that s 5D be applied separately to each independent element of harm, asking whether the negligence was "a necessary condition of the occurrence of the harm": s 5D(1)(a). If that question is answered affirmatively, it is then necessary to ask whether it is "appropriate" for the appellants' liability to extend to the harm so caused: s 5D(1)(b). But until the particular harm (in this case an element of economic loss) is established, neither of these questions can be addressed.

32 On any view, the immediate cause of the incurring of legal costs was the breakdown of the marriage. That had nothing to do with the negligence of the appellants. If the negligence of the appellants resulted in a saving of lawyers' fees, it cannot be said that the respondent suffered "harm" in this respect. If he did not suffer "harm", the negligence was a necessary condition of the incurring of those costs, but not of harm, namely economic loss.

33 There is a factual precondition to the foregoing analysis, namely that greater expense would have been incurred absent the negligent error. Establishing that fact was necessary to establish harm. Whether because of s 5E (dealing with the onus of proving "any fact relevant to the issue of causation") or in accordance with general law principles, the respondent (as plaintiff) needed to establish that he had suffered such harm. Accordingly, he needed to establish that equal or greater amounts would not have been incurred in the event that there was no negligent error. That he failed to do. He therefore failed to establish that the legal costs which he in fact incurred were harm caused by the negligence of the appellants. The amount of $70,000, together, presumably, with some element of interest (not identified in the judgment) should be removed from the award.

Discount for contingencies

34 The notice of appeal identified, in rather imprecise terms, failure by the trial judge "to discount any damages for numerous variables and contingencies which adversely affected the chance lost by the respondent": ground 1(b). This ground was expanded upon in written submissions as, in effect, encompassing two elements.

35 The first was the possibility that Ms Dieziger would not have signed either the 2002 agreement or the 2003 agreement in legally enforceable form, in compliance with s 90G of the Family Law Act. However, there was no evidential basis for this speculation. Ms Dieziger was not called by either party. The contemporaneous evidence as to her likely response to the hypothetical agreements was that she had in fact signed the invalid agreements, having received legal advice at least in relation to the first. The point on which the 2002 agreement failed was not that she had not received legal advice, nor the absence of a certificate annexed to the agreement stating that she had received independent legal advice, but merely because the agreement itself did not contain a statement to that effect. (Presumably the annexure was not treated as part of the agreement.) There is no basis for supposing that, had the body of the 2002 agreement included such a statement, the substance of which was known to her in any event, it would have altered her attitude. The 2003 agreement, conferring upon her a 15% interest in the matrimonial home was, presumably, seen by her as beneficial. Again there is no contemporaneous evidence which would suggest that despite having signed an informal agreement, she might have declined to sign an agreement in a form complying with the Family Law Act.

36 The only evidence that Ms Dieziger was dissatisfied with the financial arrangements set out in the agreement arose after the parties separated. It cannot provide support for the possibility that the deeds might not have been signed in 2002 and 2003 at a time when the parties were, so far as the evidence revealed, in an entirely amicable relationship.

37 The second element of the challenge fell into a different category. The appellants submitted that there was a significant chance that, even if the 2002 agreement had not been irregular and unenforceable because of the negligent failure to comply with s 90G(1), it would have been set aside by the Federal Magistrates Court, on one or more of the other grounds relied on by Ms Dieziger in the letter from her solicitor and set out in the particulars filed by way of response to the respondent's application in the Federal Magistrates Court. The experts retained by each side were asked to advise, though in somewhat different terms, what the respondent might have been required to pay to Ms Dieziger if, at the time of separation, there had been a financial agreement not subject to the negligent error. The experts, both former Family Court judges, being the Hon Joseph V Kay and the Hon Peter I Rose QC, stated in a joint opinion:

"After the parties separated the Plaintiff's wife had an arguable case of substance for an order setting aside the '2002 agreement' pursuant to section 90K(1)(d) of the Family Law Act. Success was not certain. That application would have relied upon the birth of the second child and the imbalance of the parties' financial resources as demonstrating 'hardship' sufficient to justify the setting aside of the earlier agreement. A further relevant factor may have been changes in the wife's health due to thyroid cancer and radiation treatment. There is however an absence of instructions regarding the impact of that health issue on the wife's capacity to earn income in the foreseeable future and a medical prognosis. Although the provisions of clause 21 are imprecise, the open-ended nature of the spousal maintenance provision may have militated against a finding that she would suffer hardship."

38 In circumstances where there was no basis for an award of damages with respect to spousal maintenance, it is by no means clear what inference is to be drawn from this opinion as to the other elements of the damages awarded. The largest element in the schedule of damages was the difference between the property settlement under the hypothetical agreement, which would have involved a payment to Ms Dieziger of 20% of the value of the house together with a relocation amount, totalling $410,000 and the amount payable under the 2008 settlement, being $906,000, a difference of $496,000, together with an amount by way of interest for the lost use of the proceeds of the sale of the house for one year ($151,200) and interest ($127,900). The basis of calculation of the elements of the 2008 settlement are not known. Whether the property settlement element contained some allowance for possible hardship, or for the absence of spousal maintenance beyond the period allowed, is not known. However, the experts clearly envisaged that the unlimited period for which spousal maintenance might be payable under the agreement might itself diminish the prospects of success of an argument based on hardship. The 2008 settlement did not allow an extended period of spousal maintenance.

39 In these circumstances, there should be a modest allowance for the possibility that even with a non-negligent financial agreement, the Federal Magistrates Court might have made further provision in favour of Ms Dieziger. Such an allowance would have reduced the difference between the amount payable under the 2008 settlement and the amount for which the respondent would have been liable, absent the negligence of the appellants. That contingency may be reflected by reducing the amount allowed for the property settlement ($496,000) by $75,000, being approximately 15% of the differential.

Interest

40 The notice of appeal alleged error by the trial judge in the assessment of interest. The written submissions noted that appropriate adjustments had been made in calculating the amount of the judgment and there was no separate challenge in respect of interest. As the submissions further noted, it will be necessary to make adjustments on account of interest to give effect to the judgment of this Court.

Conclusions

41 To give effect to these reasons, it will be necessary for the parties to prepare orders in lieu of those made by the trial judge.

42 There are two further questions which need to be addressed. First, there is a question as to the date from which the judgment should have effect. Because the Court does not know whether any or all of the judgment included in the orders entered on 21 May 2013 has been paid, the parties should have an opportunity to indicate whether judgment should be backdated to 21 May 2013 or should take effect from the date of these reasons (or the date upon which orders are entered in this Court). This will affect the calculation of prejudgment interest.

43 Secondly, there is a question as to whether, in the light of the more limited success of the plaintiff, there should be any variation of the costs order made by the trial judge, namely that the defendants pay the plaintiff's costs assessed on the ordinary basis, with interest calculated in accordance with the common equation set out in order 3 below.

44 Because it is not possible to make final orders, it is sufficient to indicate that the orders of the Court, when made, will include the following:

(1) Allow the appeal and set aside order 1 made in the Common Law Division and entered on 21 May 2013.

45 The recalculation of an appropriate judgment should take into account the following reductions of the judgment entered below:

(1) removing the sum on account of spousal maintenance of $63,200, together with interest on that amount;

(2) removing the sum of $70,000 on account of legal costs, together with interest on that amount;

(3) reducing the amount allowed by way of property settlement ($496,000) by the amount of $75,000, together with interest on that amount.

46 The parties are directed to confer with the purpose of resolving any outstanding issues and providing consent orders giving effect to the judgment of this Court within 21 days of delivery of these reasons. In the event that agreement is not achieved, whether in part or in whole, each party should file, no later than 35 days after delivery of these reasons, a document identifying his or their proposed orders and a short statement explaining the basis of any calculation and the reason for orders in that form.

47 BARRETT JA: This is an appeal from a decision of a judge of the Common Law Division (Johnson J) in professional negligence proceedings brought against solicitors.

48 The primary judge found that negligence had been proved and awarded damages of $804,420.

49 In appealing to this Court, the solicitors do not challenge the findings that a duty of care owed to the respondent was breached and that of loss or damage was occasioned to him by the breach. They do, however, challenge the primary judge's assessment of damages. Their contention, broadly stated, is that certain heads of loss were wrongly taken into account or wrongly calculated in the quantification of damages.

Facts in outline

50 The respondent, a German national, married Claudia Dieziger, a Swiss national, in Sydney in January 2002. Each had settled in Sydney a few years earlier. They met in 2000.

51 At the time of the marriage, the parties to it agreed that they should enter into a contract regulating their financial relationship. Such agreements are apparently common in Germany and Switzerland.

52 To that end, the respondent consulted Mr Andrew Corish, a solicitor then employed by the appellants. Mr Corish advised the respondent, took instructions from him and prepared a financial agreement. Ms Dieziger received advice from a solicitor in another firm. The agreement was executed by both parties on 15 April 2002. It is referred to below as "the 2002 Agreement".

53 The respondent consulted Mr Corish again in 2003 after the purchase of a family home at Balgowlah. Title had been taken by the respondent alone. He asked Mr Corish to prepare a document by which a 15 per cent interest would be given to Ms Dieziger.

54 Following receipt of those instructions, Mr Corish prepared a deed which the parties executed on 31 March 2003. In March 2004, the respondent signed a letter stating that his wife's interest in the Balgowlah property had been increased to 20 per cent.

55 The 2003 deed and the 2004 letter are referred to, for convenience, as "the Supplements".

56 The parties separated in April 2006. Their marriage was dissolved on 29 July 2007. They had two young children (born October 2001 and December 2005).

57 On 26 February 2007, the respondent commenced proceedings in the Federal Magistrates Court against Ms Dieziger seeking various parenting orders. In her response, Ms Dieziger initiated what was effectively a cross-claim by which she sought property orders and raised various challenges to the 2002 Agreement. In particular, she alleged that the 2002 Agreement did not comply with requirements of s 90G(1)(b) of the Family Law Act 1975 (Cth) and was therefore non-binding and of no effect. In June 2007, Mrs Dieziger provided further and better particulars of her challenge to the 2002 Agreement in a document dated 5 April 2007. This set out numerous matters beyond non-compliance with s 90G(1)(b).

58 On 23 August 2007, the respondent and Ms Dieziger agreed that the question whether the 2002 Agreement constituted a binding agreement in accordance with s 90G should be determined by the Federal Magistrates Court as a preliminary issue. On 14 April 2008, that court decided that matter adversely to the respondent. It was held that the 2002 Agreement was not binding because there had not been compliance with requirements imposed by s 90G(1)(b).

59 Thereafter, the parties mediated and eventually entered into an agreement settling the matrimonial proceedings. That agreement, dated 15 December 2008, is acknowledged by the parties to be a binding financial agreement for the purposes of the Family Law Act. It is referred to below as "the 2008 Agreement".

The decision at first instance

60 It was, at all times, accepted by the appellants that they were, as Mr Corish's employers, responsble for the consequences of any negligence on his part.

61 In the course of the hearing before the primary judge, the appellants admitted breach of a duty of care owed to the respondent with respect to the 2002 retainer pursuant to which Mr Corish prepared the 2002 Agreement that was ultimately set aside by the Federal Magistrates Court. It was admitted that Mr Corish had been negligent in failing to ensure that requirements under s 90G were met - specifically, the requirement under s 90G(1)(b), as in force at the relevant time, that the agreement contain, in relation to each party, a statement that the party was, before signing, given independent legal advice. Separately, there was an admission on the pleadings that a provision of the 2002 Agreement (clause 21) dealing with spousal maintenance was void for uncertainty.

62 The respondent also alleged breach of duty by Mr Corish in relation to the 2003 retainer, in that he did not, at that point, draft a new financial agreement complying with the statutory requirements. Allied with that issue was a question whether, if Mr Corish did breach his duty of care in relation to the 2003 retainer, he acted in a manner that was widely accepted in Australia by peer professional opinion as competent professional practice: s 5O Civil Liability Act 2002 (NSW). The judge determined both these issues adversely to the appellants. No appeal is brought in that connection.

63 The parties were agreed that the appropriate approach to the assessment of damages was, in general terms, to determine and compare two amounts: first, the amount that the respondent was, in the events that happened, required to pay in respect of matters sought to be governed by the 2002 Agreement (and the Supplements) which were not so governed because the agreement was not legally binding on the parties; and, second, the amount that the respondent would have had to pay in respect of those matters had the 2002 Agreement (and the Supplements) been legally binding on the parties. The excess of the first amount over the second is the core component of the respondent's damages.

64 The primary judge approached the matter of assessment of damages under several headings. He dealt first with the matter of the Balgowlah property, noting an agreed value of $1.85 million at the relevant time and that, under the 2002 Agreement (and the Supplements), the respondent would have been liable to pay Ms Dieziger 20 per cent of this ($370,000) plus $40,000 for relocation expenses (a total of $410,000). This contrasted with $906,000 in respect of the same matters under the 2008 Agreement, so that loss to the extent of the difference ($496,000) was established, subject to any appropriate discount referable to the chance that, had it been known when the deed was executed in 2003 that the 2002 Agreement was not legally binding, Ms Dieziger would have agreed to execute a new financial agreement in binding form reflecting the provisions of the 2002 Agreement but with a 20 per cent interest in the Balgowlah property allocated to her. The appellants argued that there was a substantial chance that a new and binding agreement would not have been concluded in 2003 and that a significant discount was therefore warranted. The respondent argued that there were no facts in evidence allowing assessment of any degree of possibility or probability and that there should accordingly be no discount. The judge accepted the respondent's submission and took into account an undiminished $496,000 on account of the respondent's liability to Ms Dieziger in respect of the home.

65 The second element of damages dealt with by the primary judge concerned delay in the sale of the Balgowlah property. The respondent said that, had it not been for the problem with the 2002 Agreement and its enforceability, he could have sold the property at an earlier time. His position was that the delay was one year (effectively, 1 July 2007 to 30 June 2008) and that he had been deprived of net proceeds of sale of $1,440,000 for that period and therefore of interest (at a rate of 10.5 per cent per annum) of $151,200 on that sum. The judge held that there was no evidentiary foundation for this claim - that the respondent had not shown how he would have dealt with the money had it been available to him or what return would have been earned on any particular form of investment. His Honour therefore declined to recognise any such component of damages.

66 The third matter addressed by the judge was the benefit to the respondent of delayed payment to Ms Dieziger. It was accepted that, in the events that happened, payment by the respondent was made a year later than it would have been had the 2002 Agreement operated. An allowance of $43,000 was made in favour of the appellants for this item.

67 The fourth element addressed by the judge was costs and disbursements incurred by the respondent in relation to the Federal Magistrates Court litigation. The parties agreed that $70,000 was a reasonable sum for these legal expenses. The respondent submitted that this was a component of his loss. The appellants' position was that the proceedings in which the 2002 Agreement was attacked extended beyond the distinct matter the separate determination of which led fairly quickly to the ultimate settlement. It followed, the respondents said, that the $70,000 for litigation expenses would have been incurred even if the 2002 Agreement had been binding. The primary judge rejected that contention and held that $70,000 should be included in the award of damages accordingly.

68 The fifth matter addressed by the judge was interest on the sum of $496,000 referable to the Balgowlah property and on his legal expenses of $70,000. His Honour held that both these interest items should be included as components of damages.

69 Sixthly, the primary judge dealt with the matter of spousal maintenance. The respondent contended that, if the 2002 Agreement had operated, spousal maintenance payments by him would have come to an end in April 2009, so that, as at November 2008 (when the 2008 Agreement was entered into) there would have been only six months of payments ($13,000) remaining instead of the $76,200 provided for in the 2008 Agreement. He therefore claimed that the difference of $63,200 should be included in the award of damages. He also claimed interest ($12,900). The appellants objected that this claim had been raised too late and that, in any event,circumstances were such that, if anything was taken into account under this head, it should be an allowance of $1,800 in their favour, rather than any allowance in favour of the respondent. The primary judge accepted the submissions of the respondent on this matter.

Issues on appeal

70 The appellants accept, in general terms, the correctness of the approach under which payments that the respondent was required to make under the 2008 Agreement are compared with payments that would have been required under a hypothetical binding agreement in terms of the 2002 Agreement (and the Supplements). That is no doubt the main - but not necessarily sole - determinant of the measure of damages, given that the inquiry must be as to the sum of money that will put the respondent in the same position as he would have been in if he had not sustained the wrong for which the respondents are required to compensate him: Clark v Macourt [2013] HCA 56; 88 ALJR 190 at [7] quoting Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at 39.

71 There is no complaint about the primary judge's conclusion, on that footing, regarding the $496,000 attributable to the Balgowlah property (the first component addressed by the primary judge - see [64] above). The issues calling for attention concern spousal maintenance, legal expenses and contingencies.

72 In relation to spousal maintenance, three issues must be addressed:

1. Whether the primary judge made correct findings as to what the hypothetical binding agreement would have provided as to spousal maintenance.

2. Whether the judge should have recognised and given effect to the possibility that, even with a binding agreement in place from the outset, the court would have awarded maintenance over and above that for which the contract provided.

3. Whether (and, if so, how) the judge should have taken into account the fact that the respondent made maintenance payments - for both Ms Dieziger and their children, but without any apportionment or allocation among them - over an extended period before the 2008 Agreement came into operation.

73 The appellants also contend that the judge, in considering the difference between the hypothetical agreement and the 2008 Agreement, did not apply discounts for uncertainty as to whether Ms Dieziger would, in 2003, have simply accepted the 2002 terms (as updated) or striven for a better bargain and whether a valid version of the 2002 Agreement would have been set aside.

74 In relation to legal expenses, the appellants contend that the judge erred when he accepted that the $70,000 expended on the proceedings determining that there had been non-compliance with s 90G(1)(b) would not have been incurred in any event, given that Ms Dieziger had articulated more far-reaching challenges to the 2002 Agreement, which challenges were overtaken by the result in relation to the narrow s 90G(1)(b) issue.

Approaching the quantification of damages

75 The respondent, as plaintiff, bore the burden of proving, on the balance of probabilities "with as much precision as the subject matter reasonably permitted", the amount of such loss as he had sustained: Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; 77 ALJR 768 at [37]. In a case of this type, the required degree of precision is affected by the fact that the process of comparison involves, on one side, the financial impact that would have been produced if a hypothetical binding agreement in the form of the 2002 Agreement (and the Supplements) had been in force. Necessarily called for, in that situation, is an element of conjecture as to actions that would have been taken not only by the respondent himself but also by Ms Dieziger who, of course, did not give evidence.

76 The task of the court, in that kind of situation, is that described in Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 350, referring to Malec v J C Hutton Pty Ltd [1990] HCA 20; 169 CLR 638. There must be, as to each relevant component of alleged damage, an assessment of the degree of probability of occurrence and, unless the assessment is "so low as to be regarded as speculative - say less than 1 per cent" or "so high as to be practically certain - say over 99 per cent", the court will take the chance into account at such level as it determines to be reasonable. It is, of course, not possible for the court to make the determination in an evidentiary vacuum and, while the plaintiff is not required to prove the postulated outcome according to the balance of probabilities, there must be some evidence on which to base the determination.

Spousal maintenance

77 It is necessary to say more about the primary judge's approach to this matter. His Honour dealt with it very briefly. He worked on the basis that, allowing $500 per week for three years from separation in April 2006, a total of $78,000 would have been paid up to April 2009 and that, as at November 2008 (immediately before the 2008 Agreement was entered into), six months of such payments (a total of $13,000) would have remained. This compared with $76,200 payable under the 2008 Agreement, consisting of a lump sum of $45,000 upon Ms Dieziger's vacating the family home (or, if earlier, four months and two weeks after the date of the agreement) and, as to the balance, equal monthly instalments at the rate of $400 per week for 18 months.

78 As at November 2008, it was argued, the $76,200 that the 2008 Agreement required to be paid in the future fell to be compared with then future payments of $13,000 remaining to be paid in the future under a hypothetical revised agreement entered into in 2002. The difference of $63,200 was, as it were, something that was visited upon the respondent by the 2008 Agreement that he would not have suffered under a hypothetical revised 2002 agreement. For that reason, the primary judge accepted that $63,200 represented a component of the damage the respondent had suffered. His Honour did not accept the appropriateness of a simple and direct comparison of the two aggregate spousal maintenance figures ($78,000 and $76,200). Nor did he accept the allied submission that there was, if anything, a slight detriment to the appellants rather than the respondent.

Spousal maintenance - a revised clause 21

79 The spousal maintenance provision in the 2002 Agreement formed part of clause 21. That clause was as follows:

"In the event of the separation of the parties, Daniel [the respondent] will pay the reasonable costs of enabling Claudia [Ms Dieziger] to re-establish herself and obtain alternative rental accommodation, in the sum of AUS$30,000 for Claudia and the existing child of the marriage [name deleted], plus an additional amount of $10,000 for each additional child of the marriage ('the sum'), such sum to be increased annually from the date of this Deed, in accordance with increases in the Consumer Price Index for the Sydney region, and make such payments of child support for all the children of the marriage, as if he was earning the maximum amount of child support income as defined in section 42 of the Child Support (Assessment) Act 1989, irrespective of his actual income, which child support would currently be the sum of approximately AUS$335.41 per week for the one child of the marriage, as well as pay all reasonable kindergarten and pre-school costs, school fees, university fees, health care insurance and health care costs for the children and contribute to the support of Claudia by paying spousal maintenance for a period until she is able to return to the workforce, taking into account the need to care for any children, and her ability to support herself as a result of property acquired by her, in order that Claudia can maintain a standard of living similar to the pre-separation standard of living, such payments of spousal maintenance to continue for a period of at least 3 years from the date of separation."

80 The provision concerning spousal maintenance as such is the part beginning "and contribute to the support of Claudia . . . ".

81 As I have said, there was an admission on the pleadings that clause 21 - contained, as it was, in an agreement held by the Federal Magistrates Court to be not binding - was, in any event, void for uncertainty.

82 In making submissions as to the findings that should be made as to the content of a hypothetically reformulated version of the 2002 Agreement (and the Supplements), the respondent relied not only on the words of the imperfectly drafted clause 21 but also other evidence as indicators of what a soundly drafted version of the clause in the 2002 Agreement would have required. The other evidence consisted of a typewritten note the respondent had prepared for the purpose of his initial consultation with Mr Corish (referred to below as "the typewritten note"), Mr Corish's notes of his conference with the respondent (referred to below as "the conference notes") and evidence given by the respondent of things said by him in the course of instructing Mr Corish.

83 The typewritten note the respondent took to Mr Corish was very detailed. In relation to maintenance, it set out monthly payment levels geared to a number of variables. One was the value of Ms Dieziger's separate assets; another was the number and age of children. If the separate assets were more than $501,000 and there was one child under 12, the monthly payment was nil. If assets exceeded $400,000 and all children were over 18, the monthly payment was nil. Other cases were also dealt with. There was a stated assumption that Ms Dieziger "can have at least part time work once the children are ALL 12 and older". There was a statement that maintenance would cease if Ms Dieziger married again. It is not altogether clear whether the figures given were for spousal maintenance alone or maintenance of both spouse and children. There is a sentence, in a section dealing with increase for inflation, as follows: "The inflation compensation should be applied to Claudia and Children maintenance". This suggests that spouse and children may have been dealt with together.

84 In the course of cross-examination about the typewritten note, the respondent made it clear that the subject matter had been discussed between Ms Dieziger and himself before the document was prepared. He described the content as "the result of my brain-storming" and later as the agreement he had reached with Ms Dieziger and "maybe some extra bits and thoughts of his own". He also accepted that some parts of what he had included had not been discussed with Ms Dieziger.

85 The meeting between the respondent and Mr Corish took place on 8 February 2002. The conference notes made by Mr Corish's read in part as follows:

"Maintenance -

Pay children's expenses and spousal maintenance to maintain similar standard of living (for) wife and so not obliged to work until children are of secondary school [age] except that obligation to support her as opposed (sic) reduced if receives inheritance and except reduction of spousal maintenance (in the event of) remarriage or de facto relationship or if you become bankrupt or no significant (assets).

Confirm child support pay all education, kindergarten, childcare fees, health insurance."

86 Mr Corish submitted a draft agreement under cover of a letter dated 27 February 2002. The respondent emailed Mr Corish on 28 February 2002 giving comments on the draft. There were comments on clause 21. Mr Corish submitted a revision on 22 March 2002. The respondent commented by email on 3 April 2002. In relation to spousal maintenance, he raised two queries, one concerning rent for alternative accommodation and the other concerning the possibility that Ms Dieziger might be in the workforce (including part-time employment). Mr Corish thereafter made further changes to clause 21 before the agreement was eventually executed.

87 In the course of his cross-examination, the respondent was taken to clause 21 of the agreement in its final form. He acknowledged an understanding of the concept that it was uncertain and needed a greater degree of definition and specificity. It was put to him that the sort of agreement he would have proposed was "along the lines of" the typewritten note. He disagreed. It was put to him that it would have been "along the lines of" the conference notes. Again he disagreed. He accepted that he would not have wanted to "force" Ms Dieziger back to work "if the children were still very young". He was asked whether he would have wanted to continue providing spousal maintenance "at least until the children went into primary school". He answered:

"Yes, infant primary school, yes."

88 The next question and answer were:

"Q. As you have said, 171, at least until they went into secondary school?

A. I think. I can't say yes without taking the whole context of this, just -"

89 And later:

"Q. What I am suggesting to you is, that that sort of scenario is the sort of scenario you would have promised or agreed to, that Claudia receive, say, full spousal maintenance until the children go into secondary school, and then perhaps reduces to half that, say, and then once they leave tertiary education, then it stops all together?

A. I find that hard to comment on. That is very speculative and taken out of context with all the other facets of the agreement.

. . .

Q. I am suggesting to you that that sort of regime is one that you would have proposed, which is that when the children go to secondary school, spousal maintenance continues until the children go into secondary school, then perhaps it halves because she can get back into part-time work; and then once they leave tertiary education, then she should get back to full time work, so spousal maintenance should cease all together?

A. I find this very difficult to answer. It is very speculative. I don't know how to answer this question. It is simply taken out of all the other context. I don't know what to say."

. . .

"Q. So I will give you the opportunity again if you wish to comment. I am suggesting to you that regime, whereby she gets full spousal maintenance to age - until the children are12 or in secondary school, reducing say to half until the children finish tertiary education and then ceasing altogether, would have been a regime that you would have ended up with, if you had been given the advice you need more certainty?

A. I can't answer it. I am sorry."

90 The appellants submitted before the primary judge that, under a repaired or reformulated clause 21, there was likely to have been a requirement that the respondent pay spousal maintenance on the following bases set out in the appellants' outline of closing submissions at trial:

"(a) from April 2009 to April 2012 (3 years) at $500 per week, being $78,000;

(b) from April 2012 to December 2017 (5.67 years, multiplier 250) at $500 per week, being $125,000

(c) from December 2017 to December 2026 (9 years, multiplier 380 discounted by 5.67 years for accelerated receipt) at $250 per week, being $72,000."

91 December 2017 (the end of the period in (b)) corresponds with the younger child's twelfth birthday.

92 The aggregate of the amounts in (a) to (c) is $275,000 - a sum greater by $198,800 than the $76,200 provided for in the 2008 Agreement. The appellants say that this burden of $198,800 would have been incurred by the respondent in the absence of the negligence and that there was accordingly, in effect, a substantial benefit to him because he ultimately came to be bound by the 2008 Agreement rather than a repaired version of the 2002 Agreement (plus Supplements).

93 The respondent maintains that the hypothetical repaired version of clause 21 propounded by the appellants has no foundation in the evidence. He says that his own evidence did not support the hypothesis advanced by the appellants and that no expert witness gave evidence that would support it. The consensus of the two retired Family Court judges who were expert witnesses was stated by the primary judge to be that "the amount of [spousal] maintenance that would have been payable under a valid 2002 Financial Agreement would be no more than $500.00 per week for at least three years". The agreed position of the expert witnesses was expressed by them as follows:

"1. The quantum of spousal maintenance payable by the plaintiff to his wife and the duration of such maintenance pursuant to the 2002 Agreement (if its validity was not in question) assuming that she received 20% of the net proceeds of sale of the Balgowlah property would be estimated at $500.00 per week.

2. Spousal maintenance was payable for 'at least 3 years' following separation. That liability may have subsequently continued for an indefinite period, subject to the relevant matters set out in sections 72 and 75(2) of the Act. We do not have sufficient information to be more precise.

3. The eventual receipt by the wife of an assumed 20% of the net proceeds of sale of the Balgowlah property (less any legal expenses) would not have resulted in cessation of payment of maintenance or variation of the quantum."

94 There is merit in the submissions of the respondent on this aspect. In particular, the aspects of the respondent's own evidence quoted above preclude a finding that his intentions at the time of the making of the 2002 Agreement accorded with the position for which the appellants contend. To the contrary, he made it clear that their hypothesis did not reflect what he had in mind. In addition, the evidence of the experts warranted, as the judge recognised, an assumption that, had a binding agreement been entered into in 2002, spousal maintenance would have been provided for at the rate of $500 per week for three years, at the least, that being the fixed minimum period stated in clause 21 itself.

95 The imponderable concerns the period beyond three years for which spousal maintenance at that rate would have continued. The expert witnesses considered themselves unable to come to a view on that matter because of insufficiency of information. The parameters within which the imponderable as to duration beyond three years is to be approached are, however, stated in clause 21 itself: Ms Dieziger's ability to return to the workforce, taking into account the need to care for the children and her ability to support herself as a result of property acquired by her. There was no suggestion that Ms Dieziger had any enhanced ability to support herself as a result of property acquired by her. That leaves the question of ability to return to work taking into account the need to care for the two children.

96 On that, the respondent referred to evidence that Ms Dieziger had in fact taken on part-time aged care employment for a short in 2009 but that that engagement had not lasted. There is no information about how she managed to do so in keeping with her child care responsibilities or why the engagement came to an end (although there is a suggestion that Ms Dieziger did not find the work to her liking).

97 In these circumstances, I think that the court's duty to "do its best" (Fink v Fink [1946] HCA 54; 74 CLR 127, Paino v Paino [2008] NSWCA 276; 40 Fam LR 96) requires it to work on the basis that spousal maintenance at the rate of $500 per week would have continued until the younger child turned 12, that being an age specifically contemplated by the respondent (at [83] above) and an age at which it might reasonably be expected that a child would be entering secondary school and could travel to and from school unaccompanied and wait at home with an older sibling for a sole parent to return from work.

98 On that basis, spousal maintenance under a repaired version of the 2002 Agreement should be calculated at the rate of $500 per week for an initial three year period from separation in mid-2006 and thereafter until the younger child's twelfth birthday in December 2017 - that is, a total period of 11 years and seven months, or 602 weeks. Simple adoption of a weekly rate of $500 for that period produces a total of $301,000. Alternatively, if the sums in items (a) and (b) at [90] above are considered appropriate for the period April 2009 to December 2017 and there is an added component for the period from separation in mid-2006 to the start of the period in (a) at [90], the total is $277,000, being $78,000 in (a) at [90] plus $125,000 in (b) at [90] plus $74,000 for the added component. On each such basis - and also on an alternative basis that ignores any added component for the period mid-2006 to (but excluding) April 2009 - the financial impact under the spousal maintenance provision of a repaired version of the 2002 Agreement must be taken to be more onerous on the respondent than the spousal maintenance regime embodied in the 2008 Agreement. (For completeness, it may be noted that the appellants put at trial that there was at least a chance that, even if a repaired version of clause 21 had been in force, a court would have exercised jurisdiction under s 90F of the Family Law Act to award spousal maintenance in addition to that for which the hypothetical agreement provided; but, for the reasons already given, it is not necessary to say anything more about that submission.)

99 There remains, however, the general issue of discount for contingencies to be addressed presently.

Spousal maintenance - payments actually made

100 The respondent paid Ms Dieziger maintenance of $3,000 per month from mid-2006 to December 2008, a period of some 30 months. This was not broken up into components for her maintenance and the maintenance of the children. It is, however, reasonable to assume that, on a per head basis, a greater amount would be attributable to an adult than a child, given that the adult, as parent, would attend to numerous household expenses that would be of benefit to all as a family. On that basis, it seems appropriate to work on the basis that, say, about $2,000 per month - or $500 per week - should be regarded as consisting of spousal maintenance.

101 It follows, according to the respondent, that, in determining the effect of the hypothetical 2002 Agreement as it concerns spousal maintenance, it should have been recognised not only that the repaired clause 21 would have required weekly payments as stated at [98] above but also that those payments (or, more precisely, equivalents of them) were in fact made for the period of 30 months to December 2008.

102 The fact that payments may be regarded as having been made at an effective rate of $500 per week for part of the period of six years immediately preceding judgment does no more than confirm the appropriateness of the alternative calculations at [98] above.

Summation of the factors involving spousal maintenance

103 For the reason stated, the appropriate findings with respect to spousal maintenance under a hypothetical repaired version of clause 21 of the 2002 Agreement are that

(a) such payments would have been required on the basis set out at [98] above, that is, according to any of the postulated methods of calculation there identified, in an aggregate amount substantially exceeding the $76,200 payable under the 2008 Agreement;

(b) spousal maintenance in fact paid voluntarily for the period from separation to December 2008 (an assumed $500 per week out of the composite $3,000 per month for some thirty months) would have been made under the hypothetical agreement had it been in force; and

(c) disregarding any discount factor, the relevant comparison would have been between the aggregate of $76,200 provided for in the 2008 Agreement and a sum determined in one of the ways discussed at [98] above referable to the hypothetical reformulated version of clause 21 of the 2002 Agreement.

104 On that footing (and again disregarding any discount factor), the circumstance that a repaired version of the 2001 Agreement (and Supplements) never came to create obligations of the respondent as to spousal maintenance and that that matter was governed solely by the 2008 Agreement was beneficial to the respondent rather than detrimental to the respondent. There should therefore have been no component of damages referable to spousal maintenance.

Legal expenses

105 The respondent spent money on the proceedings in the Federal Magistrates Court in which it was ultimately decided that the 2002 Agreement was not binding because there had not been compliance with the certification requirements of s 90G of the Family Law Act. The parties agreed that the sum expended was $70,000.

106 As stated above, the primary judge rejected the appellants' contention at trial that $70,000 would, in any event, have been spent by the respondent on legal expenses for litigation involving the 2002 Agreement and that the expenses referable to the s 90G(1)(b) issue should therefore not be taken into account as an element of the respondent's loss occasioned by the negligence for which the appellants were responsible. The judge's decision was as follows:

"[172] The Plaintiff claims a sum for the legal costs and disbursements in relation to the Federal Magistrates Court proceedings. A sum of $70,000.00 is agreed between the parties in this respect.

[173] The Defendants submit that no allowance should be made by way of costs and disbursements, as these sums would have been incurred in any event given the family law proceedings which were on foot and required resolution.

[174] I am satisfied that the Plaintiff has demonstrated an entitlement to the sum of $70,000.00 being included in the award of damages to be made in his favour. This is a reasonable allowance for costs incurred in litigating issues arising from the 2002 Financial Agreement."

107 There is here a distinct lack of expressed reasons but necessarily implicit in the judge's conclusion is a finding that the respondent would not have incurred $70,000 legal costs in any event. That finding is challenged on appeal.

108 The question to be addressed is whether, on the evidence, the respondent, as plaintiff, showed that there was more than a speculative possibility that Ms Dieziger would have pursued challenges to the 2002 Agreement extending beyond the s 90G(1)(b) issue, that the respondent would have resisted and that legal expenses of at least $70,000 would have been occasioned by his resistance.

109 There was no evidence from Ms Dieziger. Any assessment of the course she would or might have pursued in the matrimonial litigation can therefore come only from contemporaneous documents, evidence of the respondent and evidence of the expert witnesses.

110 Ms Dieziger's solicitors wrote to the respondent on 13 February 2007 stating four reasons why, in their opinion, the 2002 Agreement would not bind Ms Dieziger. These were, in summary, material change in circumstances since the agreement was made, absence from the agreement of disclosure of the respondent's assets at the time the agreement was signed, failure of the agreement to implement the stated intention of ensuring Ms Dieziger's standard of living and absence of ability of Ms Dieziger "to freely negotiate the document". Section 90G(1)(b) was not mentioned.

111 In the proceedings in the Federal Magistrates Court (which were commenced by the respondent), further and better particulars filed by Ms Dieziger set out various bases on which she, playing the role of cross-claimant, sought an order setting aside the 2002 Agreement:

• fraud and lack of full and frank disclosure by the respondent;
• uncertainty as to four provisions, including s 21;
• mistake of Ms Dieziger as to the legal effect of the agreement and other matters, of which mistake the respondent was aware or ought to have been aware;
• misrepresentation by the respondent as to the purpose of the agreement;
• undue influence - apparently both presumed (from the matrimonial relationship) and actual (from the circumstances in which Ms Dieziger was placed as against the respondent);
• unconscionability - relying on a number of alleged factual matters;
• material change in circumstance since the making of the agreement, including separation, the birth of the second child and the absence of contemplated jointly owned property;
• absence of an intention of the wife to create legal relations; and
• absence of s 90G(1)(b) certification.

112 The respondent confirmed in cross-examination that, had the occasion arisen, he would have defended proceedings based on issues other than s 90G(1(b) and incurred legal expenses accordingly.

113 The expert witnesses on matters of family law agreed on the following:

"After the parties separated the Plaintiff's wife had an arguable case of substance for an order setting aside the '2002 agreement' pursuant to section 90K(1)(d) of the Family Law Act. Success was not certain. That application would have relied upon the birth of the second child and the imbalances of the parties' financial resources as demonstrating 'hardship' sufficient to justify the setting aside of the earlier agreement. A further relevant fact may have been changes in the wife's health due to thyroid cancer and radiation treatment. There is however an absence of instructions regarding the impact of that health issue on the wife's capacity to earn income in the foreseeable future and a medical prognosis. Although the provisions of clause 21 are imprecise, the open ended nature of the spousal maintenance provision may have militated against a finding that she would suffer hardship."

114 The evidence to which I have referred warranted a finding that matrimonial litigation extending beyond the s 90G(1)(b) issue - indeed, potentially very far beyond - would have occurred had separate determination of the s 90G(1)(b) issue not been the catalyst for the agreed resolution ultimately embodied in the 2008 Agreement. The opinion of the expert witnesses that there was an arguable case on certain aspects (even though success was not certain), plus the fact that some of the allegations would have required substantial factual investigation - leads to a conclusion that a significant amount of money would have been spent by the respondent on legal fees. While there is no clear indication of likely amount, the fact that $70,000 was agreed to be the sum spent on the quite confined s 90G(1)(b) litigation, coupled with the far-reaching nature of Ms Dieziger's articulated claims and the expert witnesses' assessment, means that there is very pronounced likelihood that at least a like sum would have been spent by the respondent on defending those claims.

115 I am therefore of the opinion that the agreed sum of $70,000 should not have been included as a component of the damages the appellants were required to pay.

Discount for contingencies

116 On the footing that damages would appropriately reflect the difference between the financial impact of the 2008 Agreement and that which would have arisen from a new and valid version of the 2002 Agreement (and supplement) executed in 2003, the primary judge recognised a need to assess not only the content of the new and valid agreement but also the likelihood that Ms Dieziger would have agreed to execute it.

117 His Honour drew an inference that, if Mr Corish had told the respondent in March 2003 that a binding financial agreement was not in place (or that it was Mr Corish's "clear preference" that the respondent make a new agreement), the respondent would have instructed Mr Corish to prepare a new agreement in repaired form and that both the respondent and Ms Dieziger would have signed such an agreement. His Honour therefore declined to apply any discount for the possibility that such an agreement would not have been made.

118 The judge's conclusion was based on the facts that Ms Dieziger signed the 2002 Agreement after taking her own legal advice and also signed the 2003 deed. It followed, in his Honour's view, that Ms Dieziger's decision, had she been asked in March 2003 to sign a new agreement incorporating the features of the 2002 Agreement (but with a repaired clause 21) and the 2003 deed, she would have done so.

119 The appellants say that, even if the 2002 Agreement had been binding, there was at least a chance that, in 2003, Ms Dieziger would have sought to drive a harder bargain than that represented by a combination of the 2002 Agreement and the 2003 deed. The appellants point, in that respect, to the various matters raised by Ms Dieziger in the matrimonial proceedings, over and above the s 90G(1)(b) issue.

120 The respondent's response is that the defect that caused the 2002 Agreement to fail went entirely to the manner in which separate legal advice actually given was recorded and documented and that that purely formal defect in no way called into question the proposition that Ms Dieziger would have signed an agreement in the same form but for correction of the formal defect. In addition, there was no suggestion that she did not willingly sign the 2003 deed.

121 It was open to the primary judge, in my opinion, to find that in March 2003, Ms Dieziger would have signed a new financial agreement, complying with all necessary formalities and embodying the terms of a repaired version of the 2002 Agreement plus the 2003 deed. The best evidence of what she would have done in those circumstances is what she in fact did when she was unaware of the defect in the agreement prepared by the appellants. It follows that his Honour correctly rejected the argument that some discount for contingency on that account should have been allowed.

122 Another and quite separate matter requires attention under this heading, namely, the possibility that Ms Dieziger would have succeeded in having the Federal Magistrates Court set aside any binding financial agreement. As has been seen ([111] above), her challenge to the 2002 Agreement in the proceedings she actually brought went far beyond the matter of s 90G(1)(b) compliance. The additional grounds could have been deployed against a binding agreement and might have resulted in her achieving an outcome more favourable than that provided for in the 2002 Agreement (and supplements). The degree of probability of that result is not so low as to be regarded as speculative and, as Basten JA points out, such an outcome would have reduced the difference between the amount payable under the 2008 Agreement and the amount for which the respondent would have been liable but for the negligence for which the appellants are responsible. That contingency should be reflected in the way that Basten JA proposes, that is, by reducing the amount allowed for the property settlement ($496,000) by $75,000, being approximately 15% of the differential.

Conclusions

123 The primary judge's assessment of damages requires revision in three ways:

1. The sum of $63,200 included by the primary judge on account of spousal maintenance should be eliminated.

2. The sum of $70,000 included by the primary judge as stated at [174] of his reasons should be eliminated.

3. The amount allowed for the property settlement ($496,000) should be reduced by $75,000.

124 Those variations will no doubt result in changes on account of interest allowed, with the principles adopted by the primary judge regarding interest being applied to the quantum as adjusted in accordance with the foregoing. As Basten JA points out, there are also questions about the date from which judgment should be effective and whether the costs order made by the primary judge requires revision.

125 The appropriate disposition is that proposed by Basten JA at [44]-[46] of his reasons.

126 LEEMING JA: I agree with the reasons of each of Basten JA and Barrett JA, and with the orders proposed by Basten JA.

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Decision last updated: 30 July 2014